When it comes to retirement planning, it is of paramount importance that participants, particularly those nearing retirement, have an accurate understanding of their income needs and the income they are on track to have. False confidence, both in terms of underestimating needs and overestimating future income, can be terribly detrimental. As a part of this accurate understanding, participants need to be in the know about what they can expect from Social Security and how those benefits will factor into their overall retirement plans. Corporate Insight Senior Analyst Andrew Way cautions people to “view Social Security as a supplement to retirement savings.” He expands upon this stating, “Social Security can serve as a valuable piece of a larger pie representing an individual’s holistic retirement savings plan, and it is important for individuals to understand what they can realistically expect to receive in Social Security benefits.”

Further, people need to understand the nuances of Social Security to develop optimized claiming strategies. There are a variety of free Social Security benefits estimators available online as well as more robust calculators that individuals can pay to access. In our upcoming whitepaper, Comparing Social Security Benefits Estimators: What Drives Differentiation? we analyzed 10 free, publicly available tools provided by financial institutions and recognized organizations, two prominent paid calculators, and the Social Security Administration’s own Retirement Estimator. We found that, for individuals without any special circumstances at least, the tools provide relatively consistent monthly benefits estimates that do not deviate significantly from the SSA’s estimator. However, the results of our user-experience test revealed several important differentiators, particularly in the way tools communicate results.

People vary in how they conceptualize their finances and absorb data, so the best tools provide results that accommodate a range of participants. Our Vice President of User Experience Adam Hulnick says, “There is no one-size-fits-all when it comes to data and its display. Some people think about their needs based on monthly budgets and prefer monthly benefit estimates, for others, it’s more natural to compare annual estimates to their annual salaries. While data visualizations resonate with some people, others prefer reading colloquial explanations of data, so, it’s best to give people choices.”

Participants nearing retirement need to have holistic, accurate understandings of their preparedness, and reasonable expectations about Social Security benefits are an important part of that understanding. Our study suggests that, if participants use one of the free tools analyzed in this report, they will likely receive reasonably accurate benefits estimates. However, depending on the tool, participants may be more or less likely to absorb, draw meaningful inferences about and act on information. Therefore, the differences in the way Social Security benefit estimators communicate results is key, because when it comes to retirement planning, accurate information is worth little without understanding and action.